Life Without Stimulus

This is a challenging graph, to say the least. Martin Sullivan argues it proves the case against austerity as the pathway to growth:

Republicans constantly remind us that the Obama stimulus–the American Recovery and Reinvestment Act of 2009–did not work. They voted against it. In the United Kingdom the government is led by Conservative Prime Minister David Cameron. His government did not adopt stimulus. Instead it boldly enacted an economic program that cut spending and raised taxes. The chart [above] shows the results and compares it to the U.S. experience. After three and a half years, U.S. GDP is just about returning to the pre-recession peak. That's awful. But it is far better than the U.K. where GDP is still five percent ($750 billion in US terms) below its pre-recession peak.

The US has one major difference and advantage, of course. It has the global reserve currency and is not vulnerable to the kind of currency collapse that the markets can impose on other countries running massive deficits and accumulating debt. The Tories were trying to avoid sliding anywhere near the jaws of George Soros again. Obama has less to worry about. Nonetheless, fiscal retrenchment in Britain has clearly not yet led to new growth. And its recent economic history is probably the most compatible with the US among Europe's big economies.